Justice News

United States Brings Criminal Charges and Files Suit Against Center City Doctor

PHILADELPHIA, PA – United States Attorney William M. McSwain announced that Stephen Padnes, M.D., 77, of Glenside, Pennsylvania, a physician formerly licensed in Pennsylvania, was charged by Indictment with illegally distributing controlled substances and filing false tax returns (the “Indictment”). McSwain also announced two civil law suits brought by the United States, one seeking forfeiture of $1,864,545 in cash seized from the defendant’s home (the “Forfeiture Complaint”) and the other seeking penalties and damages against him for alleged improper opioid prescribing under the Controlled Substances Act and False Claims Act (the “Civil Complaint”).

The Indictment charges that Padnes illegally prescribed Schedule II controlled substances, oxycodone and methadone, on seven occasions between December 21, 2015 and June 29, 2016, without any medical necessity and outside the usual course of medical practice. It also charges that the defendant underreported the income earned by his medical practice, the Psychosomatic Medicine and Pain Rehabilitation Center, Inc., to the Internal Revenue Service by more than $700,000 for calendar years 2012, 2013, and 2014. If convicted, Padnes faces a maximum possible sentence of 149 years’ imprisonment and fines up to $7,750,000.

The Forfeiture Complaint seeks forfeiture of $1,864,545 of cash seized from the defendant’s home during the execution of a search warrant in 2016. The cash is alleged to be the cash proceeds from Padnes’ unlawful medical practice from at least 2010 to 2016. The government alleges that, during that time, the vast majority of the defendant’s “patients” paid up to approximately $500 in cash for prescriptions for controlled substances, including Schedule II opioids such as oxycodone and methadone, that he wrote outside the usual course of medical practice and without a legitimate medial purpose. The government also alleges that Padnes, at times, provided the prescriptions for payment without even seeing the supposed “patient.” The cash was discovered in suitcases and a dresser located in a bedroom in the defendant’s home.

The Civil Complaint alleges that Padnes violated the Controlled Substances Act by issuing a large number of prescriptions for Schedule II opioids in 2014, 2015, and 2016 without a legitimate medical purpose. The government alleges numerous instances where the defendant issued prescriptions for high doses of opioids without keeping medical records in the normal course of medical practice, physical exams, reevaluations, and/or monitoring of the effectiveness of the opioids he prescribed. In one example, the government alleges that Padnes issued prescriptions for so many opioids to a patient that the patient would have needed to consume nearly 70 pills, the equivalent of 4,000 milligrams of morphine, every single day. The government also alleges that the defendant violated the False Claims Act because Medicare and Medicaid paid to fill thousands of these prescriptions, causing a loss to these programs exceeding $1 million.

The Controlled Substances Act provides for penalties for each prescription issued without a legitimate medical purpose up to $25,000 for violations on or before November 2, 2015, and up to $64,820 per violation after November 2, 2015. The False Claims Act allows for damages three times the government’s loss and civil penalties between $5,500 and $11,000 for each false claim presented on or before November 2, 2015, and between $11,181 and $22,363 for each false claim presented after November 2, 2015.

“Using every tool available – from criminal charges to civil complaints – is part of my Office’s continued commitment to fighting healthcare fraud and combatting the opioid epidemic ravaging our communities,” said U.S. Attorney McSwain. “We will not allow criminals, whether they stand on a street corner or wear a lab coat, to cheat the system and exploit people in need of help in order to line their own pockets. This defendant will now have to answer for years of alleged misconduct.”

“As charged in this indictment, Dr. Padnes knew that prescribing potentially deadly amounts of opioids without medical necessity could have devastating effects,” said Maureen R. Dixon, Special Agent in Charge for the U.S. Department of Health and Human Services. “Working closely with our law enforcement partners we are committed to protecting the vulnerable patients who rely on government health programs.”

“Failure to report all income is a felony; one that could result in a prison sentence,” said Guy Ficco, IRS Criminal Investigation Special Agent in Charge. “Let the charges brought against Dr. Stephen Padnes serve as a reminder that we, along with our Law enforcement partners, stand ready to investigate and prosecute those who shirk their tax liability.”

The investigation was conducted by the Philadelphia Field Division of the Drug Enforcement Administration, the U.S. Department of Health and Human Services, Office of Inspector General, Internal Revenue Service Criminal Investigation, and the Federal Bureau of Investigation. For the United States Attorney’s Office, the criminal matter is being prosecuted by Assistant United States Attorney Jerome Maiatico, the civil forfeiture matter is being prosecuted by Assistant United States Attorney Maria M. Carrillo, and the civil Controlled Substances Act and False Claims Act matter is being prosecuted by Assistant United States Attorney John T. Crutchlow.

An Indictment or Criminal Complaint is an accusation. A defendant is presumed innocent unless and until proven guilty. The civil complaints contain allegations only; there has been no determination of liability.

UNITED STATES ATTORNEY’S OFFICE
EASTERN DISTRICT OF PENNSYLVANIA
Suite 1250, 615 Chestnut Street
Philadelphia, PA 19106
JENNIFER CRANDALL
Media Contact
215-861-8300
If you have not done so already, follow @USAO_EDPA and @USAttyMcSwain to get the most up-to-date information about big cases and community news.